MarketLine Blog

Football spending – Driven on by TV revenue and relegation fear

Headline grabbing transfer fees, staggering sums paid to agents, and a record-breaking total summer transfer spend by English Premier League clubs has prompted questions over how far football’s extravagance can go. In response, Mino Raiola, agent to Manchester United’s world record signing Paul Pogba, stated that he expects to see the first £200m ($305.6m) transfer fee paid within three to four years.

With the new deal to broadcast Premier League games coming into play this summer, clubs have vast financial resources available to them, with an estimated £2.78bn ($4.2bn) flooding into the competition each season. While the money itself obviously fuels clubs’ spending, a further incentive to spend comes in the shape of the fear of no longer having access to the riches of top tier football. As a result, a number of smaller Premier League clubs have also broken their club transfer records this summer, as they strive to maintain their place in the English Premier League.

News that many Premier League clubs have become profitable in recent years (the last TV deal was also pretty lucrative) has also attracted more investors, as clubs become viable investment opportunities, rather than just playthings for bored billionaires. This also has the effect of driving (perhaps slightly more tempered) spending, as new owners strive to improve the fortunes of their acquisitions.

The current television deal runs until summer 2019, and it looks likely that spending will continue to increase up to that point, or at least until news of what kind of deal will replace it for the 2019/20 season. However, it could all fall apart the moment television companies no longer deem it viable to offer ever-increasing sums for the rights to broadcast Premier League games. Due to the intensity of competition within the league, football clubs have often taken huge financial gambles. Worryingly for the long term security of the game, the whole precarious house of cards appears reliant on the willingness of the likes of Sky and BT Sport to shell out what amounts to an average of £10.2m ($15.6m) per match.

Posted in Entertainment, Media, Sports.

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